Banks lure customers with cash, but be wary

Sunday

Aug 31, 2014 at 12:01 AMSep 2, 2014 at 4:23 PM

It's the 21st century equivalent of giving out a toaster for opening a new bank account. Big banks, including several that have offices in Columbus, are offering cash incentives this summer for new customers who sign up for checking accounts or credit cards or to open other kinds of accounts.

Mark Williams, The Columbus Dispatch

It’s the 21st century equivalent of giving out a toaster for opening a new bank account.

Big banks, including several that have offices in Columbus, are offering cash incentives this summer for new customers who sign up for checking accounts or credit cards or to open other kinds of accounts.

But experts warn that consumers should be wary before switching banks in return for pocketing $100 or $200. They say there could be at least one catch that results in fees that could diminish the value of that incentive. And making the switch isn’t a good move if the bank doesn’t meet your needs.

Nor will everyone interested in switching qualify for some offers, which could require customers to deposit thousands of dollars or impose other demands to be eligible for the cash.

“There are some banks really incentivizing ways to make consumers do all their banking at one bank,” said Christina Lavingia, junior editor for the website GoBankingRates.com, which recently outlined the deals that big banks are offering.

Lavingia said the cash incentives have gained steam in the past three years as banks have figured out that money is what speaks to consumers, many of whom continue to feel the effects of the recession.

“A $200 cash bonus makes a huge impact to help ends meet,” she said, especially at a time when checking accounts earn almost nothing because of today’s low interest rates.

JPMorgan Chase & Co., PNC, U.S. Bank, Huntington Bancshares, Fifth Third Bank and KeyBank are among the nation’s biggest banks offering incentives, according to GoBankingRates.com. All have a significant presence in Columbus.

At Fifth Third, opening a checking account can earn a customer up to a $250 bonus, depending on the type of account, the website’s report said. KeyBank is offering $150 for a new checking account that requires at least $1,000 in direct deposits within 60 days of opening the account.

“We have figured out that cash is the common language,” said Deb Julian, a senior manager in the retail banking group of U.S. Bank who is based in Columbus. “It appeals to everyone.”

U.S. Bank is running a mail campaign targeted in the Columbus area that offers $50 to $200 for opening a checking account. Branch offices also have promotions for checking and other kinds of accounts, including credit cards.

“We want more customers, and we want more customers with more of a relationship and a deeper relationship with the bank,” she said. “Any offer that is out there is what we’re driving for.”

Huntington has several offers available in which customers typically get about $100 for opening an account, said Mary Navarro, the bank’s director of retail and business banking. That’s up from about $75 last year as competition has gotten more intense, she said.

The bank typically sends mailers to potential customers three or four times a year so that if they do think about changing banks, Huntington might be on their mind, she said.

“They get married, they get divorced, they move or they just get mad at the bank,” she said, noting some of reasons people contemplate switching banks. “Our objective is to be a welcoming brand.”

Many customers who switch to Huntington aren’t motivated by the money, she said. Instead, they are looking for convenience, 24-hour banking, mobile banking and banks that meet their needs.

“There are a lot of reasons why customers choose banks,” she said.

Not that long ago, banks offered incentives such as gift cards and iTunes downloads for opening a checking account, said Greg McBride, senior financial analyst with Bankrate.com.

“The focus on cash incentives is a reflection of the economic environment,” he said. “The economy may be recovering, but a lot of people feel like they aren’t recovering. You want something to motivate the consumer to become your customer, and cash scratches were it itches.”

But, McBride said, banks don’t want just anyone. The cash offers usually come with demands that consumers keep a minimum balance in the account or have regular checks deposited directly into the account.

Ultimately, the bank wants customers with multiple accounts like a credit card, saving accounts, car loan and a retirement account that help the bank’s bottom line, he said.

“The people who are going to meet this requirement are going to be able to grab that cash,” McBride said. “That’s not everybody.”

Not all banks are feeling the need to offer consumers incentives as lures.

“Paying hundreds of dollars to switch to your institution is kind of an insult to customers,” said G. Scott McComb, chairman and CEO of Gahanna-based Heartland Bank. “The customer is worth more than that. We try to educate the customer that this is bigger than that.”

McComb said the bank wants to convince consumers that banking with a small bank is more about the relationship.

For example, he said many community banks call customers when they overdraw their account rather than hitting them with a fee.

Heartland has offered some promotions, such as tickets to a Columbus Crew game, but has mostly shied away from such deals to lure customers, he said.

“We only have a 1 percent market share in Franklin County. We couldn’t take on 30 percent,” McComb said. “We seek out those who appreciate us where we are. They want to build a relationship with us as much as we want to with them.”

mawilliams@dispatch.com

@BizMarkWilliams

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